Our view: Micro-grants miss the mark
January 4, 2012
The city of Steamboat Springs' micro-grant program for small businesses is a well-intentioned but poorly executed effort to spur local economic development.
Instead, the city ought to consider a loan program that would allow that seed money to be used again by other promising small-business ventures or more broad-based efforts that could impact a greater number of local businesses.
The micro-grant program is part of the city's economic development policy developed within the past year to help Steamboat Springs preserve and promote existing assets as well as increase economic diversity and worker pay. There's a lot to like about the policy, and we've been vocal about the city's need to focus on economic initiatives. The city has realized some successes in the past year, such as negotiating an extended lease and facility improvements with SmartWool and offering an incentive for ACZ Laboratories to expand its west Steamboat facility that employs about 50 people.
The city also has approved several micro-grants for local small-business startups as well as existing businesses that needed a bit of a cash boost to continue to grow. According to the city's micro-grant program, businesses can apply for up to $5,000 if they meet several criteria, including being located within city limits, demonstrating other seed capital and presenting a business plan that demonstrates a return on investment. The business also can't compete directly with an existing Steamboat business. As part of the micro-grant application, businesses are asked how many new jobs they will create within the community.
But the micro-grant program is inherently flawed. First, we question whether giving businesses a couple thousand dollars is anything more than symbolic in terms of the impact that money actually can have on moving a venture from idea to reality.
Second, the program puts the city in the awkward and unnecessary position of having to decide which ideas are worth funding and which aren't. The city said it doesn't want to offer grants to businesses that might compete with existing Steamboat companies. That line gets gray rather quickly. For example, the city already has approved a micro-grant for Sober Guys, a service that drives home customers, and their vehicles, who have been out drinking. How does that not compete with Go Alpine?
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Third, once the micro-grant is approved, that taxpayer money is gone. In theory, the funds will eventually help to create new jobs and a stronger tax base. But what if they don't? There's no recourse for the city, or taxpayers, to recoup their investment.
If the city is intent on giving money to small businesses, then make it a micro-loan program that provides low- or zero-interest funds to promising startups. That money then will be paid back to the program, thereby providing a revolving door of funds than can help the next wave of bright ideas.
Or perhaps better yet, the city should continue to look at broader-based ways to improve the local business climate. Technology infrastructure would be a good place to start. Investing there could help the entirety of Steamboat Springs businesses, from those that have called Routt County home for 100 years to those that might occupy retail and office spaces in the future.